Nike Swoosh Recovery Can Fuel Rallies

The global economic recovery will be shaped like a Nike swoosh, with continuing slow and shallow growth, and the inventory cycle will have a powerful impact on profitability providing a tailwind for U.S. stocks, making any correction a buying opportunity, according to Principal Global Investors President and CEO Jim McCaughan.

“The global economies went down very sharply; it was actually the sharpest decline in global economic activity ever in the fourth quarter of last year,” McCaughan said, adding that “now we are seeing a tepid and rather shallow recovery, so I guess it’s a check mark or a tick.”

This Nike-swoosh-style growth is boosted by the business inventory cycle, he said, which is “actually a very powerful mechanism pushing companies and profitability stronger.”

The U.S. stock market has not recovered too quickly and is “not unusual,” he said, adding that a 5-to-10 percent correction in the market, regardless of reason, will present a buying opportunity because “the fundamental change in the economy is quite positive and quite benign for equities.”